The
Financial Industry Regulatory Authority Inc. is warning firms about the use of designations implying special expertise in working with older investors.
In a regulatory
notice issued this month, Finra said that more than two-thirds of surveyed broker-dealers allow registered representatives to use “senior” designations.
But the survey of 157 firms "indicated that some supervisory procedures were not particularly discerning regarding the quality of the designations," Finra said. "In certain instances, senior designations approved by firms or widely used by registered persons did not require rigorous qualification standards."
Finra suggested firms consider using some best practices found among survey respondents, such as reviewing the coursework, prerequisites and continuing education requirements for designations, judging the quality and standards of the issuing organization, and making sure that individuals who use designations have experience and expertise in working with seniors.
The self-regulator reminded broker-dealers that they must have supervisory procedures in place that are reasonably designed to prevent unethical or misleading use of senior designations.
Of the surveyed firms that allow the use of designations, 89% require approval before allowing a broker to use it, and 97% have some standards for which designations can be used.
The surveyed firms reported using 44 different senior-related designations, including those covering retirement planning and pension plans.
The Chartered Advisor for Senior Living from The American College was the most popular among brokerage firms allowing designations, with 50% of surveyed firms using it.
The Certified Senior Advisor designation was the least popular, with 52% of firms prohibiting its use.
"I don't know why the [brokerage firms] do what they do," said Edwin Pittock, founder of the Society of Certified Senior Advisors, which issues the CSA.
"We fully support and comply" with Finra's recommendations, he said. His organization has a "vigorous curriculum," a code of ethics and a standards board to handle complaints and violators.
Mr. Pittock said the CSA is not a financial designation, so the majority of newer enrollees offer homecare, elder law and or tax services. "We try to teach people how be a resource to help the senior find right place for whatever their needs are," he said.
Regulators have long been concerned about the use of senior designations and the widespread marketing of products to elderly investors via "free lunch" seminars.
In 2008, the North American Securities Administrators Association Inc. passed a model state law that prohibits the use of senior designations issued by organizations that are primarily engaged in sales or marketing and do not have certain standards in place. A number of states subsequently implemented the law.
"I think the senior designations have been misused," Mr. Pittock said, adding that the model rules helped stem abuses.
